Friday, 23 April 2021

Brexit limps on

We’re probably long past the closing date for nominations for the prize for the most absurd and mendacious comment about Brexit, including the category reserved for those made by Boris Johnson. If not, a strong new entry would be his comment this week that he will get rid of the “ludicrous” checks on the Irish Sea border, and yet again threatening to invoke Article 16 of the Northern Ireland Protocol (NIP) as he has been doing since at least 13 January (less than two weeks after it came into operation, and before, be it noted, the EU’s quickly abandoned plan to do so over vaccine shipments).

Ludicrous is a useful word here, since this is the border Johnson said he would never agree to, then agreed to, then said he hadn’t agreed to – all within the space of a few months. But beneath the latest bullish assertion is the rather different proposition that the issue is one of different “interpretations” of the NIP, and the need to “sandpaper” the border arrangements. This implies that, at least for now, the wilder demands from some Brexiters and unionists to ditch the NIP altogether are not going to be met.

This is consistent with Tony Connelly of RTE’s fascinating account of the meeting last week between David Frost and Maris Sefcovic, and its aftermath. This suggests at least a degree of returning goodwill and the continued dialing down of antagonism, as discussed in my post earlier this month. For example, the ‘hotline’ between the two co-chairs, that had existed before Frost took over from Michael Gove, has been re-instated.

More generally, the focus seems to be on technical fixes rather than political posturing (although it is worrying that Frost still appears to think that the fact that UK regulations were fully aligned with the EU on 31 December is a matter of any relevance to the post-Brexit situation in which the UK is not committed to retaining alignment). Along with the high-level improvements in tone, there are reports from business groups (£) on the ground in Northern Ireland of intense and serious efforts by the government to create compliance with the NIP, and, belatedly, signs that the Joint Consultative Working Group for the NIP is about to get going.

Reliably unreliable

All of this is better than might have been expected given Frost’s previous rhetoric and conduct. Of course it doesn’t mean that much. He may ramp the antagonism back up again for the reasons I suggested in that earlier post. It could also just be a prelude to Johnson-Frost declaring that they genuinely tried to make the NIP work, but that the EU wouldn’t cooperate and so now there is no choice but to suspend, or even renege, on the NIP. Some, no doubt, will even say that ‘that is the plan’. But my view is that, as with the negotiations that led to both the exit and future terms deals, it credits Johnson with far too much acuity to imagine that there is a ‘plan’ as such.

In fact the comparison with those negotiations is an apposite one, because what all the talk of “interpretation” and “sandpapering” codes is that what is now happening is the kind of discussion about what the NIP means in practice that should have occurred then. But Johnson and his government were fixated solely on ‘getting rid of the hated backstop’ and, later, ‘getting Brexit done’, and are only now getting round to disentangling the cart from the horse. In short, the only reliable predicter of Johnson’s behaviour is what seems to be in his personal interest on a particular day. Trying to discern a long-term ‘plan’ in that behaviour is, metaphorically speaking, like mistaking the priapic compulsions of a sex addict for a recitation of wedding vows. Come to think of it, in this case that is not a metaphor.

Given that, some of the findings of a new opinion poll conducted for the Queen’s University Belfast’s ESRC-funded Post-Brexit Governance project may not be that surprising. Whilst opinions on whether, overall, the NIP is a good or bad thing are fairly evenly split, a staggering 86% distrust or distrust a lot the UK government's ability to manage the NIP in the interests of Northern Ireland (and only 1% ‘trust a lot’ in the UK government to do so).

The rush to judgement

That aside, amid continuing reports of the damage Brexit is doing to individual businesses, this week has seen more dreary (though, as I’ll discuss below, politically meaningful) attempts to pronounce a verdict on the impact on trade based on the February bounce back. The most egregious of these was Wolfang Munchau’s Euro Intelligence briefing that Brexit has been a “macroeconomic non-event” on the basis of those February figures because they show that “UK exports have fully recovered”. This is based on the fact that “they were up 46.6% after falling 42% in January”.

But, alas, as the distinguished economist Professor Jonathan Portes pointed out (though it’s necessary to be neither an economist nor distinguished to realise it) this was based on a basic arithmetical error: these figures mean an overall fall of about 15%, not ‘full recovery’ (if X = 100, then after a 42% fall it is 58, and then a 46.6% increase brings it up to about 85).

Munchau also regurgitates the idea that modern economies are becoming all about data trade (i.e. the ‘weightless economy’ mantra that’s been around for decades) and makes the claim that gravity models of trade (i.e. that geographical distance matters) only apply to goods trade. The latter has long been a favourite idea amongst Brexiters, such as former International Trade Secretary Liam Fox, who talk of a ‘post-geography trading world’, but it is largely incorrect.

If we must analyse the limited data available so far, the UK Trade Policy Observatory or the Tony Blair Institute are better sources, and there was also a surprisingly good discussion in the Telegraph (£). But as all these recognize it really is too early to say yet what the overall effect will be (I have consistently said this since the end of the transition, by the way, whether the data were ‘bad’ or ‘good’ for Brexit). Apart from anything else, we have still to see much detail on the effects on services, rather than goods, trade. But it seems obvious by definition that the creation of trade barriers reduces trade. In any case, as the Independent’s Economic Editor Ben Chu points out, the main trade damage predicted for Brexit isn’t an absolute reduction in trade with the EU but a reduction in the growth in trade that would otherwise have occurred.

The other key point, made very neatly by Professor Gerhard Schnyder in his most recent Brexit Impact Tracker blogpost (which also has a lot of really excellent detailed discussion of the various debates about the trade figures), is that the benchmark for judging the success or otherwise of Brexit isn’t the predictions of those who warned against it but the promises of those who advocated it. From that point of view, it’s not even enough to show some post-Brexit good news (£). What matters is to show that it was caused by, and couldn’t have occurred but for, Brexit.

Why the costs of Brexit (still) matter

These latest skirmishes over the costs of Brexit are an illustration of how Brexiters have long been caught in the trap of claiming, in the same breath, that the economic consequences of Brexit will be good (or at least not bad) and that Brexit is nothing to do with economics and all about sovereignty and independence. If the latter were really true, then there would have been no need for their entire ‘Project Fear’ narrative. It was only by mobilizing the argument that there would be no economic costs that enough voters could be made to take a punt on sovereignty.

In that regard, this week saw the publication of a very interesting new report from the UK in a Changing Europe research centre about leave voter motivations. This is by no means a dead issue, because there is – at least possibly, if not probably – likely to be some kind of link between how people regard Brexit now it has happened and what they thought they were voting for in 2016. The ‘headline’ finding of the report was about how the image of leave voters as the ‘left behind’ is an inadequate one, and that many were ‘comfortably off’. That’s not exactly new, but it is a useful myth to bust if only because of the sanctimonious and hypocritical way that so many rather privileged Brexiters claim their project as an anti-elitist one.

What is more interesting about the report is how these comfortable leavers, whilst not necessarily expecting a personal economic benefit from Brexit, do envisage its benefits in economic terms. For example, they talk of it leading to increased investment because of the money (supposedly) saved and the rebuilding of manufacturing industry. This may not be surprising because, despite what was subsequently claimed, the headline Vote Leave slogan of £350 million a week for the NHS was an explicitly economic one, and over and over again the campaign materials hammered away the arguments such as that there would be more money for public services, cheaper food, and that small businesses, especially, would be more competitive when freed from EU red tape.

Of course the other headline slogan was ‘take back control’ – the sovereignty lure – but the point is that the two were made in tandem. It is simply not true that the leave case was an emotional one for independence and the remain case a rational one for prosperity. More accurately, the leave case was that sovereignty was cost-free and the remain case was that it had a price (and, in the process, foolishly conceded the false claim that sovereignty was something that had been lost). It was only afterwards that leave voters were told that they had voted for sovereignty regardless of the costs. Nor, therefore, is the frequent suggestion that remainers and leavers are talking past each other true. They make different claims, obviously, but they are claims about the same thing.  

It is this which makes current and ongoing debates about the costs of Brexit so important. The reason Brexiters want to deny them is the same reason they ran the Project Fear attack line. They know it is one terrain within which the battle for public opinion will be fought and won. Not the only one, for sure, because there are plenty of cultural (and psychological) reasons why leave voters will continue to support Brexit even if they perceive it to have been economically damaging. That is also one reason why there will always be a political temptation for Johnson to manufacture a row with the EU, for example over the NIP. But Brexiters know full well that were they to admit the economic costs but say that they don’t matter then at least some of their support would crumble. As with the debates about who voted for what, and when, discussed in last week’s post, this is still live politics which explains the claims and counter-claims about trade figures.

Proustian Brexit

Another aspect of Brexit that the UK in a Changing Europe report captures is that of nostalgia, and again it is part an economic nostalgia for lost manufacturing industries but, again, it is a mix of the economic and cultural in envisaging that with that will come a regained British “pride”. It is another example of the disjuncture between the rank-and-file leave voters and some of the leading Brexiters and their cheerleaders that, amongst the former, we do not seem to find much interest in a ‘weightless economy’ or a ‘post-geography trading world’.

Like other elements of Brexit nostalgia – ‘we managed perfectly well before’ – it seems to envisage the referendum as having been a kind of time machine. And there is a sad irony in that for, in a way, what the Trade and Cooperation Agreement has done – with its central provision of zero tariffs for goods trade ­– is to configure UK-EU trade as if for a past era of British manufacturing. But that won’t recreate that era, and is largely irrelevant to the present one. Meanwhile, the industries for which Britain might nowadays feel a legitimate pride, such as culture or design, are likely  to take a terrible hammering because of loss of single market membership and of freedom of movement of people.

Indeed, it’s becoming ever-clearer just how much ending freedom of movement of people, in particular, is going to damage Britain. The recent population drop caused in large part by the pandemic will accelerate that, in tandem with the demographics of an ageing population. How it will play out remains to be seen. The effects will be multiple and varied. In some industries, perhaps especially agriculture and retail, it is more likely to mean increased mechanization than increased wages or job opportunities for British workers.

Some of the respondents in the UK in a Changing Europe report suggest that ‘lazy’ British workers will be forced to take up the slack, but that rests upon numerous myths both about this supposed laziness and the supposed generosity of the benefits system. It’s of note that this week it was quietly announced that the Pick for Britain scheme has ended in failure, and there is now a cabinet split (£) over increasing the quota for temporary work visas for jobs like fruit picking. Overall there may well be increased employment of immigrants from outside the EU – hardly, perhaps, what many leave voters envisaged – and it’s quite likely that loosening visa restrictions will be a requirement of making trade deals with, for example, India, especially if there is to be much liberalization of services trade.

Whatever may happen with immigration following Brexit, nothing can replicate the incredible freedom to come and go at different times and for different reasons, economic and non-economic, that have been sacrificed. We haven’t lost that in order to regain the past. We’ve just lost it and entered a diminished future.

 

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